Clearbanc Offering Funding to Combat US-China Tariff Costs
November 16, 2019
Clearbanc, the Toronto-based funding company co-founded by Dragons’ Den’s Michele Romanow, has announced this month that it will be expanding its funding options to support those small businesses who need assistance purchasing inventory from Chinese suppliers.
Specializing in funding businesses who require capital for digital adverts, the Canadian firm decided to expand its offerings after Chinese suppliers started to require inventory payments upfront as a response to the pressure caused by President Trump’s trade war with China. “This isn’t really about the tariffs,” explained Romanow. “This is really about the fact that now all of the Chinese suppliers, because of the uncertainty, are asking for upfront payments for inventory.”
With the Black Friday-Cyber Monday weekend approaching, vendors are looking to be as well stocked as possible, especially when estimates are saying shoppers will spend more than $136 billion in Q4 2019. Most notably affected will be those merchants who deal in electronics. And with worries of the spending extravaganza weekend being affected by the tariffs having persisted for months, Clearbanc is aiming to step in and soothe some of the uncertainty.
Not being limited to goods coming from China, funding is also available to all businesses looking to secure capital for inventory purposes, regardless of the supplier’s location; with a charge of 9% of the total amount funded, and funds available being between $10,000 and $10 million.
Speaking on the company’s strategy, Romanow had to say that “every political change can certainly breed new business, but these are all fairly new so we’re just listening and figuring out what our founders are looking for.”
“Predatory Lenders” Slammed as Bill to Ban Confessions of Judgment Nationwide Advances
November 14, 2019
(Bloomberg is majority owner of Bloomberg News parent Bloomberg LP)
Rep. Nydia Velázquez (D) celebrated the advancement of a bill on Thursday that aims to outlaw confessions of judgment (COJs) in commercial finance transactions nationwide. HR 3490, dubbed the Small Business Lending Fairness Act, made its way through the House Financial Services Committee on a vote of 31-23. The next step will be a floor vote.
Velázquez made direct references to a Bloomberg News story series published last year about “predatory lending” and a NY Times article about Taxi medallion loans as her basis for supporting it. Velázquez said that New York had become a breeding ground for “con artists” that relied on COJs to prey on mom-and-pop businesses. The congresswoman singled out New York because of recent taxi medallion loan outrage and the state’s alleged reputation as a “clearing house” for obtaining fast easy judgments against debtors nationwide. New York took a major step to change that practice earlier this year through a new law that only allows COJs to be filed in the state against New York residents. HR 3490 seeks to prevent them from being filed in every state, including New York.
Ironically then, the bill is at odds with the new New York law in that Velázquez’s bill, if it became federal law, would go so far as to prevent New York’s own courts from entering a COJ against New York’s own residents, if it resulted from a commercial finance transaction.
While momentum in the House could be perceived as a partisan initiative unlikely to survive the Senate, the bill has in fact garnered a degree of Republican support, recently through Rep. Roger W. Marshall, a co-sponsor of the bill, and originally by Senator Marco Rubio who initially sparked the call to action in the Senate last year.
The Financial Svcs Committee approved my bill to end "Confessions of Judgment", contracts that allow for unfair, predatory small business loans & that have been linked to #taximedallion crisis in NYC.
On to the House floor!
Read More: https://t.co/xHaYnLKme4@NYTW @FSCDems
— Rep. Nydia Velazquez (@NydiaVelazquez) November 14, 2019
A co-author of the COJ-centric Bloomberg News stories was quick to take the credit for the advancement of Velázquez’s bill.
the bill was drafted in response to our series Sign Here to Lose Everythinghttps://t.co/lrfIW3P0yi
— Zeke Faux (@ZekeFaux) November 14, 2019
Selecting a Third-Party Commercial Collection Agency
November 8, 2019
It’s said that anyone can lend money out but the hard part is getting paid back. The latter part is full of nuance, a 32-page white paper authored by Minnesota-based Dedicated Commercial Recovery (Dedicated) reveals.
“Choosing a third-party commercial collection agency is a matter of comparing potential returns and risks in order to achieve an optimal balance of both,” the report opines. “The purpose of this paper is to present one possible outline for making such a balanced choice.”
While it may be views that Dedicated espouses, the report stops short of self-promotion while raising valuable questions that anybody contracting with a commercial collection agency would benefit from considering. After all, even if third-party collections inherently suggests that relations between the original parties have broken down, the collections experience can set the final tone on how a customer feels about your brand.
That’s just the tip of the iceberg, according to the report. The collections process can have legal implications, present operational challenges, and ultimately impact the efficient orderly flow of business.
COJ Enforcer Gets COJ’d By City of New York And Is Forced to Resign NYC Marshal Position
November 7, 2019
A New York City marshal at the center of a controversial Bloomberg News story series last year about “predatory lending,” has resigned after a city probe, the City of New York announced.
Marshal Vadim Barbarovich was allegedly a prolific enforcer of New York judgments obtained by confession. After irregularities were discovered by the Department of Investigation with how he served levies, the City of New York formally levied penalties of their own against him that include a return of fees and poundage earned from 92 improperly served levies, his resignation, and a $300,000 fine.
The City agreed to suspend the full amount of the monetary fine provided he complies with an orderly wind-down of his business by March 20th. Barbarovich, in a twisted circumstance of irony, had to guarantee full immediate payment in the instance he did not comply…by signing a Confession of Judgment.
The investigation into Barbarovich began in May 2018, 4 months before Bloomberg News published their story, details published by the City reveal.
Earlier this year, New York State passed a law restricting COJs from being entered against non-New York state debtors.
David Goldin is BACK – The Scoop Behind His Return
November 7, 2019
“When I started, the term merchant cash advance didn’t even exist. There really were no business loans back then, the word ‘fintech’ didn’t exist, ‘alternative lender’ didn’t exist … Back in the day it was all about getting a credit facility, and that was like the iPhone 5, and now we’re the iPhone 11. There’s more ways to be a lot less stressful, a lot more productive, and a lot less time consuming. There’s other financial instruments to really help companies excel.”
This is how David Goldin speaks of the difference between the early days of the alternative funding industry, a marketplace which he helped form in the pre-crash years of the noughties, and now, a moment which sees the CEO’s return to the market after years abroad.
Having founded Capify, an alternative finance company, in 2002, Goldin had worked in the space for over a decade before he exited the US market in January of 2017, choosing to instead focus his efforts on the UK and Australia.
Over two years later, Goldin is back in the States with Lender Capital Partners, offering capital to commercial finance companies, with a priority given to those who deal in MCAs and business loans. “It’s very exciting, I’m coming in from a different perspective,” noted Goldin. “It’s still a great industry. I’m just coming at it from a different angle which I think could be a lot more productive and scale a lot faster.”
And as well as funding the funders, this new angle includes forward flow programs, a commitment to participate in deals up to $1 million, credit facilities in the range of $20-100 million, a system by which point of sale providers are able to provide merchant financing via their software, and the Broker Graduate Program. The last of these being LCP’s in-house channel open to brokers who originate a minimum of $500,000 a month, and who want to receive capital and advice from LCP in order to become a direct funder.
When asked why he chose to return via this more top-down approach to the industry, Goldin explained that “there’s enough good players here that are trying to originate on the merchant side, so rather than try to reinvent the wheel I thought I’d come in with my years of experience running a MCA alternative lending platform in the US, knowing what the pain points are.”
Made possible through a partnership with Basepoint Capital, LCP is there to help MCA and business loans companies through both the good times and the bad, according to its founder, saying that what was a lesson for him partly informs LCP’s model.
“The time to raise money is when you don’t need it. If you run into trouble where your lender gets spooked or either has their own financial issues, or it’s a regulatory or macroeconomic condition, you just can’t bring in a new lender within 30 or 60 days, and if you do it’s not going to be on favorable economic terms. It’s really going to be a desperate attempt to get it … It’s almost like having more than one internet connection in your office, if one goes down you have a backup with no downtime.”
Who Exactly Got Paid In Knight Capital’s Sale… And How Much? ($27.8M)
November 6, 2019
Update 11/7/19 9:05 AM: Ready Capital Corporation confirmed this morning that Knight Capital’s total sale price was $27.8M. $10M was in stock.
When Ready Capital Corporation acquired Knight Capital last week for $10 million in stock and an undisclosed amount of cash, questions abounded over who directly benefitted from the sale and how much cash was actually exchanged.
Documents later submitted by Ready Capital revealed that Knight Capital was owned by a San Jose, CA-fund named Len Co, LLC. Len Co began lending to Knight Capital in 2014 and later converted a large principal balance into a major equity investment in Knight in early 2018.
Several months later, Len Co’s primary creditor forced Len Co into Chapter 7. Shares in Knight, being a major asset of Len Co, became a talking point of that proceeding, ultimately propelling Knight into the hands of an eager buyer, Ready Capital Corporation.
The stock in the sale was therefore almost entirely paid out to the Estate of Len Co, LLC (640,205 of the 658,771 Ready Capital Corporation shares to be precise). This being the case was a reflection of the predicament Len Co was in, not necessarily that there was anything adverse about Knight.
On May 31, the bankruptcy court presiding over Len Co approved a proposed sale of Knight Capital to a confidential buyer for a grand total of $25 million, via $10 million in stock and a whopping $15 million in cash to be completed by December 31, 2019.
The buyer was identified as a publicly traded company. Assuming no better bids were received by Mid-August, the company would be sold for the $25 million under the terms offered to the publicly traded buyer. The court reaffirmed it on August 15th.
In October, Ready Capital Corporation announced that they had acquired 100% of Knight Capital in a deal for $10 million in stock and an undisclosed amount of cash.
Update: After this story was posted, Ready Capital confirmed on a morning earnings call that the sales price was slightly more than $25M and was finalized at $27.8M.
Merchant Cash Advance Industry Pioneer David Goldin Launches Lender Capital Partners To Provide Financing To Merchant Cash Advance / Alternative Business Loan Providers
November 5, 2019
White Plains, NY – November 5, 2019 – David Goldin, one of the merchant cash advance industry pioneers who founded one of the first US merchant cash advance providers in 2002, Capify (formerly known as AmeriMerchant), that later expanded to the UK and Australia has partnered with a subsidiary of Basepoint Capital, a seasoned specialty finance group, to form Lender Capital Partners (http://www.lendercapitalpartners.com). Basepoint has provided over $300 million in committed financings / forward flow purchases in the merchant cash advance / alternative business loan industry.
Lender Capital Partners (LCP) provides MCA and alternative business lending platforms with strategic capital including:
- Forward flow programs – LCP funds 100% of the amounts disbursed by the platform in connection with their funding of advances / business loans including sales commissions to their customers to free up cash and avoid the burden of equity requirements or “hair cut” money associated with traditional asset-based credit lines.
- Participations / Syndication – by having LCP purchase a participation in larger deals, the platform is able to offer larger size approvals to their customers and brokers / referral partners without taking on concentration risk. LCP can participate up to $1 million in each deal and provide strategic capital by offering our many years of industry experience underwriting larger size deals.
- Credit facilities – LCP provide credit facilities for MCA and alternative business loan providers that begin at a minimum of $20 million and can go up to $100 million+. Our credit facilities typically offer a higher advance rate than a bank and less stringent concentration limits.
- Broker Graduation Program – LCP will allow brokers to take the next step of becoming a direct lender by providing the capital and know-how needed to fund deals on their own. Designed for brokers that can originate a minimum of $500k/month, LCP can provide the capital needed and set up brokers with one of our partners to provide a back office if needed for underwriting / servicing without having to make the investment on their own.
- Point of Sales / Credit Card Processor Merchant Cash Advance / Merchant Financing Program – LCP can provide a turnkey solution for POS / Credit Card Processing companies to offer a merchant financing program to their merchants to compete with some of the larger POS providers / credit card processors that are now offering these programs in-house and have had great success. LCP can provide the capital needed for a merchant financing / merchant cash advance program as well as introduce one of our underwriting/servicing partners if needed.
“After exiting the US MCA business in 2017, I have decided the time is right to offer my 17+ years of global MCA / business lending experience to the industry by partnering with Basepoint to supply capital to the MCA / business loan industry. I believe the various programs we offer at Lender Capital Partners are tailored for just about any company in the industry – for both current lenders as well as larger brokers/ISOs that are looking to graduate to the next step of becoming a lender as well as to POS providers / merchant acquirers looking to offer an in-house program to their merchants. And my 17+ years industry experience is a great value-added benefit that very few lenders, if any can bring to the table”, says David Goldin, a principal of Lender Capital Partners.”
About LENDER CAPITAL PARTNERS
Lender Capital Partners provides capital to commercial lenders, particularly in the merchant cash advance / alternative business loan industry. One of the founders of Lender Capital Partners is David Goldin. David is the Founder of Capify, one of the first merchant cash advance providers in the US founded in 2002. David scaled Capify to 225 employees operating in 4 countries and sold the US business to a competitor in 2017 and secured a $95 million credit facility with Goldman Sachs to fund Capify UK and Capify Australia which has over 125 employees total today operating in each of those markets. David has over 17 years experience in the merchant cash advance / alternative business finance industry and is considered a pioneer in the industry. David’s extensive expertise allows Lender Capital Partners to bring strategic value to our relationships, not just capital. For more information on Lender Capital Partners, visit http://www.lendercapitalpartners.com
Shopify Capital Originated $141M Of Loans And MCAs In Q3, Says It’s a Meaningful Part Of The Shopify Business
October 29, 2019
Shopify Capital, Shopify’s small business funding division, originated $141 million in loans and merchant cash advances last quarter, an 85% increase over Q3 last year.
The company has now cumulatively originated $768.9M since it began funding in April 2016.
On the earnings call, Shopify COO Harley Finkelstein commented on the company’s recent initiative to fund non-Shopify payment merchants by saying that “while it’s still early, we’re seeing strong adoption from those merchants.”
“We started Shopify Capital to help solve another playing field for entrepreneurs, access to capital to grow their businesses,” he explained. “This is especially true as merchants gear up for their busiest selling season of the year.”
When asked about how funding would play a role in the company’s long term expansion and retention plans, Finkelstein said the following:
[P]art of this is making sure that we have merchants in the entirety of their journey to success, certainly things like having additional cash for things like inventory and marketing are very important to them. And there’s not too many place to get that with capital. So we think we’re helping merchants by doing this. It also serves of course as a way to retain merchants because we’re not only now their e-commerce platform or the point sale provider or the payments provider, we’re also now in some cases playing the role of their capital provider.
So this is a meaningful part of our business, and it keeps growing, and it’s certainly something we’re very proud of. And in terms of managing the risk, it’s something we keep a close eye on. We do a ton of trade forecasting and ensuring that we look at the data to update our models as we see trends changing. That being said, it’s important to remember that most of the capital that we put out there is insured by our partner EDC.
So we think that we continue to grow the capital business at the same time manage the risk and so we’re not doing anything that is outside of that loss ratio and risk exposure comfort zone that we think we have right now.
Shopify CEO Tobi Lutke later added how their Capital division adds to their Gross Merchandise Value (GMV) because merchants use funds to build their businesses.”What happens is a lot more businesses, that otherwise would not have access to loans get them and therefore actually continue building their business.”
